The directors have pleasure in presenting their annual report and the audited financial statements for the year ended December 31, 2011.

Principal Activitiesopen

The Company acts as an investment holding company and also trades electrical and electronic products.

The principal activities of the principal subsidiaries and associates are set out in Notes 55 and 56 to the financial statements, respectively.

Results and Appropriationsopen

The results of the Group for the year ended December 31, 2011 are set out in the consolidated statement of comprehensive income on page 52.

An interim dividend of HK5.00 cents (approximately US0.64 cent) per share amounting to approximately US$10,347,000 was paid to the shareholders during the year.

The directors now recommend the payment of a final dividend of HK7.75 cents (approximately US1.00 cent) per share to the shareholders on the register of members on May 25, 2012, amounting to approximately US$15,976,000.

Property, Plant and Equipmentopen

The Group continued to expand its business and during the year spent approximately US$16,879,000 on moulds and tooling and acquired office equipment, furniture and fixtures for approximately US$12,279,000 and plant and machinery for approximately US$15,709,000. Details of these and other movements in the property, plant and equipment of the Group and the Company during the year are set out in Note 17 to the financial statements.

Share Capitalopen

Details of movements during the year in the share capital of the Company are set out in Note 44 to the financial statements.

A total of 5,516,500 ordinary shares of HK$0.10 each were repurchased by the Company during the year at prices ranging from HK$4.62 to HK$6.33 per share. The aggregate amount paid by the Company for such repurchases amounting to US$3,817,000 was charged to the retained earnings.

The repurchased shares were cancelled and the issued share capital and the capital redemption reserve of the Company was reduced and increased respectively by the par value of those cancelled shares.

The repurchase of the Company’s shares during the year were effected by the directors pursuant to the mandate from shareholders received at the previous annual general meeting, with a view to benefiting shareholders as a whole by enhancing the net asset value per share and earnings per share of the Company.

Directorsopen

The directors of the Company during the year and up to the date of this report were:

In accordance with Article 103 of the Company’s Articles of Association, Messrs. Chi Chung Chan, Stephan Horst Pudwill, Vincent Ting Kau Cheung and Manfred Kuhlmann will retire at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.

No director proposed for re-election at the forthcoming Annual General Meeting has a service contract which is not determinable by the Group within one year without payment of compensation, other than statutory compensation.

Terms of Office of Non-executive Directors and Independent Non-executive Directorsopen

The term of office for each of the Non-executive Directors and Independent Non-executive Directors is the period up to his retirement by rotation in accordance with Article 103 of the Company’s Articles of Association.

Directors’ and Chief Executive’s Interestsopen

As at December 31, 2011, the interests and short positions of the directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”)) which have been notified to the Company pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which any such director or chief executive was taken or deemed to have under such provisions of the SFO) or as recorded in the register required to be kept under section 352 of the SFO or otherwise notified to the Company and The Stock Exchange of Hong Kong Limited pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“the Listing Rules”) and as adopted by the Company, were as follows:

Name of directors

Capacity/Nature of
interests

Interests in
shares (other
than pursuant
to equity
derivatives)(1)

Interests in
underlying
sharespursuantto equity derivatives(1)

Total
interests
in shares/
underlying
shares

Approximate
aggregate
percentage
of interests

Mr Horst Julius Pudwill

Beneficial owner

145,361,000

1,200,000

400,480,794

25.01%

Interests of spouse

760,000

—

Interests of controlled corporation

253,159,794(2)

—

Mr Joseph Galli Jr

Beneficial owner

814,500

2,000,000

2,814,500

0.18%

Mr Kin Wah Chan

Beneficial owner

—

1,000,000

1,000,000

0.06%

Mr Chi Chung Chan

Beneficial owner

—

1,000,000

1,000,000

0.06%

Mr Stephan Horst Pudwill

Beneficial owner

4,509,500

1,000,000

5,509,500

0.34%

Prof Roy Chi Ping Chung BBS JP

Beneficial owner

56,405,948

600,000

94,216,978

5.88%

Interests of spouse

136,000

—

Interests of controlled corporation

37,075,030(3)

—

Mr Vincent Ting Kau Cheung

Beneficial owner

1,920,000

600,000

2,520,000

0.16%

Mr Joel Arthur Schleicher

Beneficial owner

100,000

600,000

760,000

0.05%

Interests of spouse

—

60,000(1)

Mr Christopher Patrick Langley OBE

Beneficial owner

900,000

600,000

1,500,000

0.09%

Mr Manfred Kuhlmann

Beneficial owner

—

600,000

600,000

0.04%

Mr Peter David Sullivan

Beneficial owner

—

600,000

600,000

0.04%

Notes:

(1)

Interests in shares and underlying shares stated above represent long positions of the Company.

The interests of the directors of the Company in the underlying shares pursuant to equity derivatives, which were held as beneficial owner, represent share options granted to them respectively pursuant to the share option schemes adopted by the Company, details of which are separately disclosed in the section headed “Share Options” below. These share options are physically settled and unlisted.

The interests of the spouse of Mr Joel Arthur Schleicher in the underlying shares pursuant to listed equity derivatives represent an interest in 60,000 underlying shares held in the form of 12,000 American Depositary Receipts, each representing 5 shares of the Company.

(2)

These shares were held by the following companies in which Mr Horst Julius Pudwill has a beneficial interest:

No. of shares

Sunning Inc.

216,084,764

Cordless Industries Company Limited *

37,075,030

253,159,794

(3)

These shares were held by Cordless Industries Company Limited* in which Prof Roy Chi Ping Chung BBS JP has a beneficial interest.

*

Cordless Industries Company Limited is owned as to 70% by Mr Horst Julius Pudwill and as to 30% by Prof Roy Chi Ping Chung BBS JP.

Save as disclosed above, none of the directors and the chief executive of the Company was interested or had any short position in any shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV or the SFO) as at December 31, 2011.

Share Optionsopen

Scheme adopted on March 28, 2002 (“Scheme C”)Scheme C was adopted pursuant to a resolution passed on March 28, 2002 for recognition of the contribution to the development and growth of the Group by the eligible persons. This scheme expired on March 27, 2007. Under Scheme C, the Board of Directors of the Company may grant share options to the following eligible persons (and their wholly owned companies) of the Company, its subsidiaries and any companies in which the Group holds any equity interest, to subscribe for shares in the Company:

(iv)any person or entity that provides research, development or other technological support; or

(v)shareholders.

Share options granted must be taken up within 21 days of the date of grant upon payment of HK$1.00 in cash by way of consideration for the grant thereof. Share options may be exercised at any time from the date of grant to the fifth anniversary thereof. The subscription price is set at the highest of: the closing price of the shares on the date of offer of the share option; or the average closing price of shares as stated in the daily quotation sheets issued by the Stock Exchange for the five trading days immediately preceding the date of offer; or the nominal value of shares on the date of offer.

The maximum number of shares in respect of which share options may be granted under Scheme C is not permitted to exceed 30.00% of the issued share capital of the Company from time to time or 10.00% of shares in issue as at the adoption date of Scheme C. No person shall be granted an option which exceeds 1.00% of the shares in issue as at the date of offer in any 12-month period up to the date thereof.

Scheme adopted on May 29, 2007 (“Scheme D”)Following the termination of Scheme C, a new share option scheme was adopted pursuant to a resolution passed on May 29, 2007 for recognition of the contribution to the development and growth of the Group by the eligible persons. This scheme will expire on May 28, 2017. Under Scheme D, the Board of Directors of the Company may grant share options to the following eligible persons (and their wholly owned companies) of the Company, its subsidiaries and any companies in which the Group holds any equity interest, to subscribe for shares in the Company:

(vi)any person or entity that provides research, development or other technological support; or

(vii)shareholders.

Share options granted must be taken up within 21 days of the date of grant, upon payment of HK$1.00 in cash by way of consideration for the grant thereof. Share options may be exercised at any time from the date of grant to the tenth anniversary thereof. The subscription price is set at the highest of: the closing price of the shares on the date of offer of the share option; or the average closing price of shares as stated in the daily quotation sheets issued by the Stock Exchange for the five trading days immediately preceding the date of offer; or the nominal value of shares on the date of offer.

The maximum number of shares in respect of which share options may be granted under Scheme D is not permitted to exceed 30.00% of the issued share capital of the Company from time to time or 10.00% of shares in issue as at the adoption date of Scheme D. No person shall be granted an option which exceeds 1.00% of the shares in issue as at the date of offer in any 12-month period up to the date thereof.

The following table discloses movements in the Company’s share options during the year:

Share option holders

Date of share options granted

Share option scheme category

Outstanding at beginning of the year

Granted during the year

Exercised during the year

Lapsed during the year

Outstanding at end of the year

Subscription price

Exercise period

HK$

Directors

Mr Horst Julius Pudwill

16.11.2009

D

600,000

—

—

—

600,000

6.770

16.11.2009 - 15.11.2019

26.11.2010

D

600,000

—

—

—

600,000

8.310

26.11.2010 - 25.11.2020

Mr Joseph Galli Jr

1.11.2006

C

1,500,000

—

—

(1,500,000)

—

11.252

1.11.2006 - 31.10.2011

6.3.2007

C

1,000,000

—

—

—

1,000,000

10.572

6.3.2007 - 5.3.2012

16.11.2009

D

1,000,000

—

—

—

1,000,000

6.770

16.11.2009 - 15.11.2019

Mr Kin Wah Chan

16.11.2009

D

1,000,000

—

—

—

1,000,000

6.770

16.11.2009 - 15.11.2019

Mr Chi Chung Chan

16.11.2009

D

1,000,000

—

—

—

1,000,000

6.770

16.11.2009 - 15.11.2019

Mr Stephan Horst Pudwill

16.11.2009

D

1,000,000

—

—

—

1,000,000

6.770

16.11.2009 - 15.11.2019

Prof Roy Chi Ping Chung BBS JP

16.11.2009

D

600,000

—

—

—

600,000

6.770

16.11.2009 - 15.11.2019

Mr Vincent Ting Kau Cheung

16.11.2009

D

400,000

—

—

—

400,000

6.770

16.11.2009 - 15.11.2019

23.5.2011

D

—

200,000

—

—

200,000

9.872

23.5.2011 - 22.5.2021

Mr Joel Arthur Schleicher

16.11.2009

D

400,000

—

—

—

400,000

6.770

16.11.2009 - 15.11.2019

23.5.2011

D

—

200,000

—

—

200,000

9.872

23.5.2011 - 22.5.2021

Mr Christopher Patrick Langley OBE

16.11.2009

D

400,000

—

—

—

400,000

6.770

16.11.2009 - 15.11.2019

23.5.2011

D

—

200,000

—

—

200,000

9.872

23.5.2011 - 22.5.2021

Mr Manfred Kuhlmann

16.11.2009

D

400,000

—

—

—

400,000

6.770

16.11.2009 - 15.11.2019

23.5.2011

D

—

200,000

—

—

200,000

9.872

23.5.2011 - 22.5.2021

Mr Peter David Sullivan

16.11.2009

D

400,000

—

—

—

400,000

6.770

16.11.2009 - 15.11.2019

23.5.2011

D

—

200,000

—

—

200,000

9.872

23.5.2011 - 22.5.2021

Total for directors

10,300,000

1,000,000

—

(1,500,000)

9,800,000

Employees

1.1.2006

C

50,000

—

—

(50,000)

—

18.690

1.1.2006 - 31.12.2010

1.3.2006

C

1,884,000

—

—

(1,884,000)

—

13.970

1.3.2006 - 28.2.2011

15.6.2006

C

200,000

—

—

(200,000)

—

10.270

15.6.2006 - 14.6.2011

17.6.2006

C

350,000

—

—

(350,000)

—

10.550

17.6.2006 - 16.6.2011

4.10.2006

C

75,000

—

—

(75,000)

—

11.628

4.10.2006 - 3.10.2011

8.11.2006

C

30,000

—

—

(30,000)

—

12.200

8.11.2006 - 7.11.2011

4.12.2006

C

150,000

—

—

(150,000)

—

10.952

4.12.2006 - 3.12.2011

13.12.2006

C

20,000

—

—

(20,000)

—

10.560

13.12.2006 - 12.12.2011

1.1.2007

C

150,000

—

—

—

150,000

10.080

1.1.2007 - 31.12.2011

6.3.2007

C

4,325,000

—

—

—

4,325,000

10.572

6.3.2007 - 5.3.2012

20.7.2007

D

200,000

—

—

—

200,000

10.060

20.7.2007 - 19.7.2017

24.8.2007

D

2,060,000

—

—

—

2,060,000

8.390

24.8.2007 - 23.8.2017

16.10.2007

D

75,000

—

—

—

75,000

8.810

16.10.2007 - 15.10.2017

7.11.2007

D

40,000

—

—

—

40,000

8.088

7.11.2007 - 6.11.2017

23.11.2007

D

500,000

—

—

—

500,000

7.578

23.11.2007 - 22.11.2017

14.1.2008

D

1,020,000

—

(50,000)

—

970,000

7.566

14.1.2008 - 13.1.2018

17.4.2008

D

1,825,000

—

—

(250,000)

1,575,000

7.780

17.4.2008 - 16.4.2018

14.5.2008

D

240,000

—

(200,000)

—

40,000

7.500

14.5.2008 - 13.5.2018

30.5.2008

D

640,000

—

—

(150,000)

490,000

7.546

30.5.2008 - 29.5.2018

1.9.2008

D

150,000

—

—

—

150,000

7.450

1.9.2008 - 31.8.2018

11.9.2008

D

50,000

—

—

—

50,000

7.430

11.9.2008 - 10.9.2018

2.10.2008

D

75,000

—

—

—

75,000

7.068

2.10.2008 - 1.10.2018

1.12.2008

D

100,000

—

—

—

100,000

2.340

1.12.2008 - 30.11.2018

16.11.2009

D

7,335,000

—

(205,000)

(50,000)

7,080,000

6.770

16.11.2009 - 15.11.2019

7.12.2009

D

100,000

—

—

—

100,000

6.790

7.12.2009 - 6.12.2019

21.12.2009

D

225,000

—

—

—

225,000

6.350

21.12.2009 - 20.12.2019

28.12.2009

D

30,000

—

—

—

30,000

6.390

28.12.2009 - 27.12.2019

13.9.2010

D

1,050,000

—

—

—

1,050,000

7.390

13.9.2010 - 12.9.2020

17.1.2011

D

—

20,000

—

—

20,000

10.436

17.1.2011 - 16.1.2021

16.12.2011

D

—

100,000

—

—

100,000

7.530

16.12.2011 - 15.12.2021

Total for employees

22,949,000

120,000

(455,000)

(3,209,000)

19,405,000

Total for all categories

33,249,000

1,120,000

(455,000)

(4,709,000)

29,205,000

The weighted average closing prices of shares on the options grant date during 2011 and 2010 were HK$9.70 and HK$7.49 respectively.

The closing price of the Company’s shares immediately before various dates of grant ranged from HK$7.30 to HK$10.04.

The weighted average closing prices of the Company’s shares immediately before various dates during 2011 and 2010 on which the share options were exercised were HK$10.10 and HK$8.15 respectively.

The fair values of the share options granted in 2011 and 2010 measured at various dates of grant ranged from HK$1.92 to HK$2.58 and HK$1.89 to HK$2.14 per option respectively.

Arrangements to Purchase Shares or Debenturesopen

Other than as disclosed above, at no time during the year was the Company, or any of its subsidiaries, a party to any arrangements to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate and neither the directors or the chief executive, nor any of their spouses or children under the age of 18, had any right to subscribe for the securities of the Company, or had exercised any such right.

Director’s Interests in Contracts of Significanceopen

No contract of significance, to which the Company, or any of its subsidiaries, was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.

Substantial Shareholder’s Interestsopen

As at December 31, 2011, the interests and short positions of the following persons, other than directors and chief executive of the Company, in the shares, underlying shares and debentures of the Company which have been disclosed to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO have been recorded in the register kept by the Company pursuant to section 336 of the SFO:

Name

Total
interests
in shares
(L/S/LP)*

Approximate
aggregate
percentage
of interests

Capital Research and Management Company(1)

95,470,000 (L)

5.96%

Deutsche Bank Aktiengesellschaft(2)

97,311,752 (L)
66,938,951 (S)
1,868,000 (LP)

6.08%
4.18%
0.12%

FMR LLC(3)

128,013,000 (L)

7.99%

Hang Seng Bank Trustee International Limited(4)

96,079,000 (L)

6.00%

JP Morgan Chase & Co.(5)

187,207,433 (L)
4,650,000 (S)
179,520,433 (LP)

11.69%
0.29%
11.21%

* (L/S/LP) represents (Long position/Short position/Lending Pool)

Notes:

(1)

The following is a breakdown of the interests in shares in the Company held by Capital Research and Management Company:

Total interests in shares

Name

Remarks

Direct interests

(L/S)

Deemed interests

(L/S)

Approximate percentage
of interests

Capital Research and Management Company

(1a)

—

—

95,470,000

(L)

5.96%

Remarks:

(1a)

The capacity of Capital Research and Management Company in holding the 95,470,000 shares of long position was as an investment manager. Its 100% controlling shareholder is The Capital Group Companies, Inc.

(2)

The following is a breakdown of the interests in shares in the Company held by Deutsche Bank Aktiengesellschaft:

Total interests in shares

Name

Remarks

Direct interests

(L/S/LP)

Deemed interests

(L/S)

Approximate percentage
of interests

Deutsche Bank Aktiengesellschaft

(2a)

97,311,752
66,938,951
1,868,000

(L)
(S)
(LP)

—
—
—

—
—
—

6.08%
4.18%
0.12%

Remarks:

(2a)

The capacity of Deutsche Bank Aktiengesellschaft in holding the 1,868,000 shares of lending pool was as custodian corporation or approved lending agent.

(3)

The following is a breakdown of the interests in shares in the Company held by FMR LLC:

Total interests in shares

Name

Remarks

Direct interests

(L/S)

Deemed interests

(L/S)

Approximate percentage
of interests

FMR LLC

(3a)

—

—

128,013,000

(L)

7.99%

Fidelity Management & Research Company

(3b)

—

—

105,119,500

(L)

6.56%

Fidelity Management Trust Company,

Pyramis Global Advisors LLC

(3b)

—

—

22,893,500

(L)

1.43%

Remarks:

(3a)

The capacity of FMR LLC in holding the 128,013,000 shares of long position was as an investment manager.

(3b)

Fidelity Management & Research Company and Fidelity Management Trust Company, Pyramis Global Advisors LLC were all indirect owned by FMR LLC and by virtue of the SFO, FMR LLC was deemed to be interested in the shares held by these subsidiaries.

(4)

The following is a breakdown of the interests in shares in the Company held by Hang Seng Bank Trustee International Limited:

Total interests in shares

Name

Remarks

Direct interests

(L/S)

Deemed interests

(L/S)

Approximate percentage
of interests

Hang Seng Bank Trustee International Limited

(4a)

—

—

96,079,000

(L)

6.00%

Cheah Company Limited

(4b)

—

—

96,079,000

(L)

6.00%

Cheah Capital Management Limited

(4b)

—

—

96,079,000

(L)

6.00%

Value Partners Group Limited

(4b)

—

—

96,079,000

(L)

6.00%

Value Partners Limited

(4b)

96,079,000

(L)

—

—

6.00%

Remarks:

(4a)

The capacity of Hang Seng Bank Trustee International Limited in holding the 96,079,000 shares of long position was as Trustee (other than bare trustee).

(4b)

Cheah Company Limited, Cheah Capital Management Limited, Value Partners Group Limited and Value Partners Limited were all direct or indirect owned by Hang Seng Bank Trustee International Limited and by virtue of the SFO, Hang Seng Bank Trustee International Limited was deemed to be interested in the shares held by these subsidiaries.

(5)

The following is a breakdown of the interests in shares in the Company held by JPMorgan Chase & Co:

Total interests in shares

Name

Remarks

Direct interests

(L/S)

Deemed interests

(L/S/LP)

Approximate percentage of interests

JPMorgan Chase & Co.

(5a)

—
—
—

—
—
—

187,207,433
4,650,000
179,520,433

(L)
(S)
(LP)

11.69%
0.29%
11.21%

JPMorgan Chase Bank, N.A.

(5b)

179,520,433
—

(L)
—

4,165,000
4,150,000

(L)
(S)

11.47%
0.26%

J.P. Morgan Securities Ltd.

(5b)

3,650,000
3,650,000

(L)
(S)

—
—

—
—

0.23%
0.23%

J.P. Morgan Chase International Holdings

(5b)

—
—

—
—

3,650,000
3,650,000

(L)
(S)

0.23%
0.23%

J.P. Morgan Chase (UK) Holdings Limited

(5b)

—
—

—
—

3,650,000
3,650,000

(L)
(S)

0.23%
0.23%

J.P. Morgan Capital Holdings Limited

(5b)

—
—

—
—

3,650,000
3,650,000

(L)
(S)

0.23%
0.23%

J.P. Morgan International Finance Limited

(5b)

—
—

—
—

3,665,000
3,650,000

(L)
(S)

0.23%
0.23%

Bank One International Holdings Corporation

(5b)

—
—

—
—

3,665,000
3,650,000

(L)
(S)

0.23%
0.23%

J.P. Morgan International Inc.

(5b)

—
—

—
—

3,665,000
3,650,000

(L)
(S)

0.23%
0.23%

JF Asset Management Limited

(5b)

3,022,000

(L)

—

—

0.19%

JPMorgan Asset Management (Asia) Inc.

(5b)

—

—

3,022,000

(L)

0.19%

JPMorgan Asset Management Holdings Inc.

(5b)

—

—

3,022,000

(L)

0.19%

J.P. Morgan Whitefriars Inc.

(5b)

15,000

(L)

—

—

0.00%

J.P. Morgan Overseas Capital Corporation

(5b)

—

—

15,000

(L)

0.00%

J.P. Morgan Markets Limited

(5b)

500,000
500,000

(L)
(S)

—
—

—
—

0.03%
0.03%

Bear Stearns Holdings Limited

(5b)

—
—

—
—

500,000
500,000

(L)
(S)

0.03%
0.03%

Bear Stearns UK Holdings Limited

(5b)

—
—

—
—

500,000
500,000

(L)
(S)

0.03%
0.03%

The Bear Stearns Companies LLC

(5b)

—
—

—
—

500,000
500,000

(L)
(S)

0.03%
0.03%

JP Morgan Chase Bank, N.A. – London Branch

(5b)

500,000
500,000

(L)
(S)

—
—

—
—

0.03%
0.03%

Remarks:

(5a)

JPMorgan Chase & Co. is listed on New York Stock Exchange. The capacity of JPMorgan Chase & Co. in holding the 187,207,433 shares of long position, 4,650,000 shares of short position and 179,520,433 shares of lending pool respectively was as controlled corporation.

Save as disclosed, no other person was interested in or had a short position in the shares, underlying shares and debentures of the Company which would fall to be disclosed to the Company under Divisions 2 and 3 of the Part XV of the SFO as at December 31, 2011.

Sufficiency of Public Floatopen

The Company has maintained a sufficient public float throughout the year ended December 31, 2011.

Donationsopen

During the year, the Group made charitable and other donations totalling US$305,000.

Auditoropen

A resolution will be submitted to the Annual General Meeting to re-appoint Messrs Deloitte Touche Tohmatsu as auditor of the Company.